Correlation Between Sensient Technologies and PPG Industries
Can any of the company-specific risk be diversified away by investing in both Sensient Technologies and PPG Industries at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sensient Technologies and PPG Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sensient Technologies and PPG Industries, you can compare the effects of market volatilities on Sensient Technologies and PPG Industries and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sensient Technologies with a short position of PPG Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and PPG Industries.
Diversification Opportunities for Sensient Technologies and PPG Industries
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sensient and PPG is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries and Sensient Technologies is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sensient Technologies are associated (or correlated) with PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and PPG Industries go up and down completely randomly.
Pair Corralation between Sensient Technologies and PPG Industries
Considering the 90-day investment horizon Sensient Technologies is expected to generate 1.28 times more return on investment than PPG Industries. However, Sensient Technologies is 1.28 times more volatile than PPG Industries. It trades about 0.1 of its potential returns per unit of risk. PPG Industries is currently generating about 0.11 per unit of risk. If you would invest 7,298 in Sensient Technologies on October 23, 2024 and sell it today you would earn a total of 233.00 from holding Sensient Technologies or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sensient Technologies vs. PPG Industries
Performance |
| Timeline |
| Sensient Technologies |
| PPG Industries |
Sensient Technologies and PPG Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sensient Technologies and PPG Industries
The main advantage of trading using opposite Sensient Technologies and PPG Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensient Technologies position performs unexpectedly, PPG Industries can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in PPG Industries will offset losses from the drop in PPG Industries' long position.| Sensient Technologies vs. Innospec | Sensient Technologies vs. Minerals Technologies | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller |
| PPG Industries vs. Air Products and | PPG Industries vs. Linde plc Ordinary | PPG Industries vs. Ecolab Inc | PPG Industries vs. LyondellBasell Industries NV |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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